UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  FORM 10-QSB/A

(Mark One)

        |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES

                              EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2004

       |_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT

                        For the transition period from to

                        Commission file number 000-24001

                               IQ BIOMETRIX, INC.

        (Exact name of small business issuer as specified in its charter)

             Delaware                                      76-0552098
----------------------------------                     -------------------
   (State or other jurisdiction                          (IRS Employer
 of incorporation or organization)                     Identification No.)

         39111 Paseo Padre Parkway, Suite 304, Fremont, California 94538
                    (Address of principal executive offices)

                   (510) 795-2900 (Issuer's telephone number)

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of March 31, 2004 the registrant
had 23,903,545 shares of its common stock outstanding.

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|

Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|

<PAGE>

                                TABLE OF CONTENTS

                               FORM 10-QSB REPORT

                                 March 31, 2004

                                                                            PAGE

PART I - FINANCIAL INFORMATION
   Item  1.  Consolidated Financial Statements (unaudited)                   3
     Consolidated Balance Sheet March 31, 2004                               3
     Consolidated Statements of Operations for the three and nine months
       ended March 31, 2003 and 2004                                         4
     Consolidated Statements of Cash Flows for the nine
        months ended March 31, 2003 and 2004                                 5
     Notes to Interim Financial Statements                                   6

   Item 2. Management's Discussion and Analysis or Plan of Operation         6

   Item 3. Controls and Procedures                                          18

PART II - OTHER INFORMATION
   Item 2. Changes in Securities and Use of Proceeds                        19
   Item 6. Exhibits and Reports on Form 8-K                                 20

SIGNATURES


                                       2
<PAGE>

                          PART I. FINANCIAL STATEMENTS

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                           CONSOLIDATED BALANCE SHEET

                                 March 31, 2004

<TABLE>
<CAPTION>
                                     ASSETS
<S>                                                                             <C>
CURRENT ASSETS:
Cash                                                                            $    72,686
Trade accounts receivable, net of allowance for doubtful accounts of $0              34,433
Inventory                                                                             4,821
Other                                                                               149,809
                                                                                -----------
                               Total current assets                                 261,749
INTANGIBLES, net                                                                     96,557
OFFICE EQUIPMENT, net                                                                 6,568
                                                                                -----------
                               Total assets                                     $   364,874
                                                                                ===========
                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Convertible debentures, net of discount                                         $ 1,546,136
Accounts payable                                                                     52,995
Accrued expenses                                                                    226,000
                                                                                -----------
                               Total current liabilities                          1,825,131
COMMITMENTS

STOCKHOLDERS' DEFICIT:
Preferred stock, $.01 par value; 10,000,000 shares authorized, none issued -
Common stock, $.01 par value; 50,000,000 shares authorized, 23,903,545 shares
outstanding, $239,036; additional paid-in capital $9,344,854; Accumulated
deficit ($11,044,147)

                               Total stockholders' deficit                       (1,460,257)
                                                                                -----------
                               Total liabilities and stockholders' deficit      $   364,874
                                                                                ===========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       3
<PAGE>

                               IQ BIOMETRIX, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                       For the three months ended          For the nine months ended
                                              March 31,                             March 31,
                                         2004              2003              2004              2003
<S>                                  <C>               <C>               <C>               <C>
Revenue - software sales             $     72,158      $     44,986      $    210,512      $     73,291

Operating expenses

     Cost of sales                         32,503             3,181            83,585            17,303
     Sales and marketing                  122,799            28,416           303,613           114,300
     General and administrative         2,376,315           300,125         4,687,869           855,324
     Research and development              21,750             6,330           171,918            86,597
     Interest, net                        383,561             6,206         1,108,009            25,318
     Impairment                                 0                 0            20,042            52,401
     Depreciation/Amortization                993             6,818             7,668            20,328
       Total operating expenses         2,937,921           351,076         6,382,703         1,171,571

Net Loss                             $ (2,865,763)     $   (306,090)     $ (6,172,191)     $ (1,098,280)

Basic and Diluted net loss per share ($      0.13)     ($      0.02)     ($      0.29)     ($      0.07)
Weighted average shares
     outstanding                       22,225,077        17,088,647        21,171,763        16,702,777
</TABLE>


                                       4
<PAGE>

                                IQ BIOMETRIX, INC
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                For the nine months ended
                                                                       March 31,
                                                                 2004             2003
                                                              -----------      -----------
<S>                                                           <C>              <C>
OPERATING ACTIVITIES:

      Net loss                                                $(6,172,191)     $(1,098,280)

      Adjustments to reconcile net loss to
        net cash used in operating activities
          Depreciation and amortization                            50,689           20,328
          Stock Warrants issued as interest on loans                   --           19,112
          Common stock issued for services                      4,023,131           64,868
          Non cash compensation expense                           479,234               --
          Writeoff of advance to former director                       --           52,401
          Amortization of debt discount                           894,668               --
           Changes in assets and liabilities:
              Accounts receivable                                 (28,460)          (3,248)
              Advance to IQ Entertainment                              --          (26,121)
              Inventory                                             1,187           12,000
              Prepaid expenses                                   (111,927)              --
              Accounts payable and accrued expenses               140,819          221,309
                                                              -----------      -----------
      Net cash used in operating activities                      (722,850)        (737,631)
                                                              -----------      -----------

       Investing activities

              Purchase of fixed assets                             (1,845)              --
              Purchase of intellectual property                   (50,000)              --
              Note receivable                                      50,000               --
              Increase in deposits                                     --             (950)
                                                              -----------      -----------
      Net cash used in investing activities                        (1,845)            (950)
                                                              -----------      -----------

      Financing activities

              Proceeds from sale of common stock                       --          200,000
              Proceeds from exercise of options                    49,700               --
              Proceeds from new convertible notes payable         700,000          400,000
              Payments on demand notes payable                    (50,000)              --
              Proceeds from demand notes payable                       --           50,000
                                                              -----------      -----------
      Net cash provided by financing activities                   699,700          650,000
                                                              -----------      -----------

      Net increase (decrease) in cash                             (24,995)         (88,581)

      Cash, beginning of year                                      97,681           92,213
                                                              -----------      -----------

      Cash, end of year                                            72,686            3,632
                                                              ===========      ===========
</TABLE>


                                       5
<PAGE>
                               IQ BIOMETRIX, INC.

                      NOTES TO INTERIM FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of IQ Biometrix,
Inc. have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of financial position
and the results of operations for the interim periods presented have been
reflected herein. The results of operations for interim are not necessarily
indicative of the results to be expected for the full year. Notes to the
financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for 2003 as reported in the 10-KSB
have been omitted.

STOCK BASED COMPENSATION:

The Company accounts for its employee stock-based compensation plans in
accordance with the instrinsic value method under Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees. The Company
granted 450,000 options to purchase common stock to employees in the three
months ending March 31, 2004. All employee options vest over 24 months, and have
an exercise price of $1.50. No expense was recorded for these options under the
intrinsic value method for the three months ending March 31, 2004.

The following table illustrates the effect on net loss and net loss per share if
the Company had applied the fair value provisions of FASB Statement No. 123,
Accounting for Stock-Based Compensation, to stock-based employee compensation.

                                               Three Months Ended
                                                    March 31,
                                              2004             2003
                                           -----------      -----------
Net loss available to common               $(2,865,763)     $  (306,090)
  stockholders, as reported

Less:  stock based compensation
           determined under fair value
           based method                       (786,810)              --
                                           -----------      -----------
  Pro forma net loss                       $(3,652,573)     $  (306,090)
                                           ===========      ===========

  Basic and diluted net loss per share
      As reported                          $     (0.13)     $     (0.02)
                                           ===========      ===========
      Pro forma                            $     (0.16)     $     (0.02)
                                           ===========      ===========

Third party consultants were issued options to purchase 310,000 shares of common
stock with a five year life and exercise prices ranging from $1.28 to $1.50.
Total non-cash expense of $449,234 based on fair value using the Black Scholes
method was recorded as of March 31, 2004.

NOTE 2 - CONVERTIBLE NOTES PAYABLE

Under generally accepted accounting principles in the United States, IQ
Biometrix is required to record the value of beneficial conversion features of
convertible debentures as a debt discount. In addition, the value of any
underlying warrants determined using the Black Scholes method is also recorded
as a debt discount. This debt discount will be amortized and charged to interest
expense over the term of the respective debenture agreements. In the event the
investors convert the debentures prior to the maturity of the agreements, then
generally accepted accounting principles require IQ Biometrix to expense the
unamortized balance of the debt discount in full. During the three months ended
March 31, 2004, no debentures were converted.

NOTE 3 - STOCK ISSUANCES

* During the nine month period ended March 31, 2004, IQ Biometrix issued 452,840
shares for $49,700 in cash pursuant to option exercises. During the three month
period ended March 31, 2004, 180,000 shares were exercised for $18,000 in cash
pursuant to option exercises.

* During the nine month period ended March 31, 2004, IQ Biometrix issued
3,524,072 shares to consultants for corporate development, marketing, investment
banking, investor relations and sales support services valued at $4,023,131.
During the three month period ended March 31, 2004, IQ Biometrix issued 925,403
shares to consultants for corporate development, marketing, investment banking,
investor relations and sales support services valued at $1,683,499.


                                       6
<PAGE>

* During the nine month period ended March 31, 2004, IQ Biometrix issued 189,637
shares to a board member in repayment of debt, and payment for consulting
services and expense reimbursements valued at $123,264.

* During the nine month period ended March 31, 2004, IQ Biometrix issued 71,111
shares in payment of intellectual property valued at $67,998 in the nine month
period ended March 31, 2004.

* During the nine month period ended March 31, 2004, IQ Biometrix issued 60,000
shares in payment of accrued but unpaid interest valued at $55,800.

* During the nine month period ended March 31, 2004, IQ Biometrix issued 700,000
shares issued related to accrued stock issuance totaling $168,000 at June 30,
2003.

NOTE 4 - SUBSEQUENT EVENTS:

On April 15, 2004, IQB and Wherify Wireless, Inc. ("Wherify") jointly announced
the signing of a definitive agreement under which Wherify Acquisition, Inc., a
wholly-owned subsidiary of IQB, would be merged with and into Wherify and
Wherify would become a wholly-owned subsidiary of IQB. Under the proposed
transaction, IQB would issue to Wherify shareholders approximately 33 million
shares of IQB common stock, based on the shares of capital stock of Wherify
Wireless, Inc. outstanding as of April 15, 2004 and assuming a one-for-four
reverse split of the outstanding shares of IQB common stock. The proposed
transaction has been unanimously approved by the boards of directors of IQB and
Wherify and is subject to several terms and conditions, including approval by
both the stockholders of IQB and the shareholders of Wherify. If either party
terminates the proposed merger under circumstances specified in the merger
agreement such party would be required to pay the other party a termination fee
of $500,000. Upon completion of the merger, IQB would change its name to
"Wherify Wireless, Inc." The full text of the merger agreement is attached as an
exhibit to the Report on Form 8-K filed by IQB with the SEC on April 19, 2004.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward-Looking Statements

In addition to historical information, this report contains predictions,
estimates and other forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act
of 1934 that relate to future events or our future financial performance. These
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance
or achievements expressed or implied by the forward-looking statements. These
risks and other factors include those listed under "Risk Factors" and elsewhere
in this Registration Statement, and some of which we may not know. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "continue" or the negative of these terms or other
comparable terminology. In addition, these forward-looking statements include,
but are not limited to, statements regarding the following:

* our belief that our FACES(TM) technology will help solve the growing need for
effective tools to fight crime and terrorism as well as offering potential
applications relating to other industries;

* our belief that our InterCode(TM) coding system is a breakthrough feature that
can serve as the first international standard in the generation of unique
alphanumeric codes for facial recognition data;

* our belief that international markets represent a significant market for our
products and services;

* our belief that we have ample room to penetrate further the public
security/law enforcement agencies segment of the market;

* our intention to compete vigorously in terms of price, product features,
product performance, ease of use, quality of support and service, and company
reputation;

* our expectations regarding the sources from which we will finance our
operations;

* our expectations regarding the amount of funds we will need in the future;

* our expectations regarding the focus of our sales efforts on our existing
customers;

* our expectations regarding the amount of additional development expenses
needed to pursue our research and development strategy;

* our expectations regarding the timing of the rollout, release or public
availability of any products of ours now or hereafter under development;

* our expectations regarding our receipt of revenues from training users of our
products;


                                       7
<PAGE>

* our intentions and expectations regarding the future availability of now
undeterminable revenue opportunities arising out of our technology;

* our expectations regarding the abilities and use in certain locations of our
FACES(TM) technology;

* our intentions regarding the protection of our proprietary information;

* our expectations and intentions regarding our ability to make available the
finest facial composite technology on the market;

* our intentions regarding the continued development and refinement of our
existing products, and the development and commercialization of various computer
programs and products using the InterCode(TM) technology;

* our intentions regarding the continuation of our direct selling efforts; and

* our intentions regarding our marketing and sales efforts.

These statements are only predictions and are subject to risks and
uncertainties, including the following:

* the difficulty of forecasting revenues due to weakness and uncertainties
related to general economic conditions and overall demand within our markets and
among our current and prospective customers;

* our ability to introduce and gain customer acceptance of new products on a
timely basis;

* the availability and timely distribution of governmental funding;

* our ability to obtain additional debt or equity financing at all or on
reasonable terms;

* the failure to execute on our acquisition and partnering strategies and our
expansion into potential new markets, which may prevent achievement of
profitability in a timely manner;

* our ability to introduce and gain customer acceptance of new products on a
timely basis;

* the protection of our proprietary technology

* unforeseen development delays for new products that limit our ability to
generate revenues;

OVERVIEW

IQ Biometrix, Inc. is a provider of biometric software and services primarily to
law enforcement agencies and the security industry and is headquartered in
Fremont, California. IQ Biometrix markets, distributes and sells a facial
composite software tool called FACES(TM) to federal, state and local law
enforcement agencies and the security industry in the United States and abroad.

During fiscal year 2003 we derived substantially all of our revenues from sales
of our FACES(TM) 3.0 product. In July 2003, we launched FACES(TM) 4.0. FACES(TM)
4.0 contains significant enhancements and new features over FACES(TM) 3.0,
including the ability to use the TRAK service offered by SocialTech, Inc., which
allows any police officer to create high-resolution photo bulletins and share
them electronically with other law enforcement jurisdictions, the media, and the
community where appropriate. Revenues in fiscal years 2003 and 2004 were derived
from a diverse customer base sold mainly in units of 1 to 50. No customer was
responsible for more than 2% of revenues. Approximately 69% of the increase in
our revenues for the current quarter and 75% for the nine months ended March 31,
2004 was due to an increase in our pricing. The number of licenses sold
increased by 15% for the current quarter, but is down 15% for the nine months
ended March 31, 2004. In March 2004, the Company held its first training
session, which it sold out. The idea is to package a one day training session at
a reduced fee with the purchase of the software.

In March, 2004, we entered into a strategic relationship with a
leading training organization to offer classes and training programs to existing
and potential customers in witness interviewing techniques and advanced uses of
the FACES(TM) technology, such as age progression, creating virtual lineups and
integrating composites with video and photo enhancement technology, to produce
more accurate composites and maximize the potential of the FACES(TM) technology.
The Company charges the attendees of these training sessions a fee, which
includes a fee for training services as well as a software license fee for the
Company's FACES software. In March 2004, the Company held its first training
session. The Company has scheduled additional sessions over the next several
months.

We market and sell our products both directly through our own sales force as
well as indirectly through resellers and distributors in the United States. To
date, most of our sales have been in North America; however, we recently began
to seek relationships with international distributors and resellers to sell our
products internationally. We are continually reviewing our sales and
distribution strategy to seek ways to increase sales of our product and
revenues.

Cost of revenues currently consists of inventory, product shipping and packaging
costs.

Sales and marketing expenses consist primarily of salaries, commissions and
related expenses for personnel engaged in marketing, sales and customer support,
as well as costs associated with promotional activities and related travel
expenses. Commissions are accrued at the rate of 20% of net revenues per
quarter. We are currently maintaining staffing and costs at current levels as
the Company works towards completion of the pending merger with Wherify
Wireless.


                                       8
<PAGE>

General and administrative expense consists primarily of salaries and related
expenses for executive, finance, accounting, information technology, facilities,
and human resources personnel. We expect these expenses to increase only
slightly over the next quarter in the areas of legal, accounting and outside
services as we prepare filings and other information needed for the pending
merger with Wherify Wireless.

Research and development expense consists primarily of salaries and related
personnel expense, fees paid to consultants and outside service providers, and
other expenses related to the design, development, testing and enhancement of
our products. Currently we are focusing our attention on is on FACES 5.0. We are
also continually seeking other products and intellectual property that could be
used to enhance our current product and/or product line. We expense our research
and development costs as they are incurred. We believe that a significant level
of investment for product research and development is required to remain
competitive.

On April 15, 2004, IQB and Wherify Wireless, Inc. ("Wherify") jointly announced
the signing of a definitive agreement under which Wherify Acquisition, Inc., a
wholly-owned subsidiary of IQB, would be merged with and into Wherify and
Wherify would become a wholly-owned subsidiary of IQB. Under the proposed
transaction, IQB would issue to Wherify shareholders approximately 33 million
shares of IQB common stock, based on the shares of capital stock of Wherify
Wireless, Inc. outstanding as of April 15, 2004 and assuming a one-for-four
reverse split of the outstanding shares of IQB common stock. The proposed
transaction has been unanimously approved by the boards of directors of IQB and
Wherify and is subject to several terms and conditions, including approval by
both the stockholders of IQB and the shareholders of Wherify. If either party
terminates the proposed merger under circumstances specified in the merger
agreement such party would be required to pay the other party a termination fee
of $500,000. Upon completion of the merger, IQB would change its name to
"Wherify Wireless, Inc." The full text of the merger agreement is attached as an
exhibit to the Report on Form 8-K filed by IQB with the SEC on April 19, 2004.

RESULTS OF OPERATIONS

Revenues increased approximately 187% to $210,500 for the nine months ended
March 31, 2004 from $73,300 for the nine months ended March 31, 2003. In the
three months ended March 31, 2004 revenues increased 60% to $72,200 as compared
to $45,000 for the three months ended March 31, 2003. Revenues increased in the
relevant periods primarily because we released our new FACES(TM) version 4.0 in
July of 2003 and substantially increased our license fee. Approximately 69% of
the increase in our revenues for the three months ended March 31, 2004 was due
to an increase in our pricing, and the number of licenses sold increased by
approximately 15%. Approximately 75% of the increase in our revenues for the
nine months ended March 31, 2004 was due to an increase in our pricing, and the
number of licenses sold decreased by approximately 15%. 2004 revenues were
derived primarily from the sale of FACES(TM) 4.0 while 2003 revenues were from
the sale of our FACES(TM) version 3.1 and FACES(TM) version LE products.

Sales and marketing expense increased 166% to $303,600 for the nine months ended
March 31, 2004 from $114,300 for the nine months ended March 31, 2003. The
increase was due to increased promotions and marketing expenses incurred in
conjunction with the release of FACES 4.0 and additional sales staff added to
try and better penetrate the market. Of these expenses, $268,000 were paid with
common stock. In the three months ended March 31, 2004 sales and marketing
expense increased 332% to $122,800 from $28,400 for the three months ended March
31, 2003. Sales and marketing expense increased primarily due to an increase in
sales staff of $20,000, marketing services of $45,000 and accrued commissions of
$30,000.

General and administrative expense increased 448% to $4,687,869 for the nine
months ended March 31, 2004 from $855,300 for the nine months ended March 31,
2003. In the three months ended March 31, 2004, general and administrative
expense increased 692% to $2,376,300 from $300,100. The increased spending was
mainly for investor relations of $1,277,000, investment banking and business
consulting fees of $1,364,000, legal and audit fees of $828,000, and payroll of
$615,000. The use of these services is related to the company's search for
additional sources of capital, partnering or acquisition opportunities and
creating and maintaining the corporate infrastructure needed in a public
company. Of these expenses, approximately $3,977,000 was paid in the form of
shares of our common stock. The increase in general and administrative expenses,
during the three months ended March 31, 2004, was mainly for investor relations
expenses of $986,000, investment banking and business consulting fees of
$413,000, legal fees of $245,000, and payroll of $217,000. Of these expenses,
approximately $1,981,000 was paid in the form of shares of our common stock. The
use of these services is related to the company's search for additional sources
of capital, partnering or acquisition opportunities. The use of these funds in
the three months ended March 31, 2004 was primarily related to the Company's
search for additional sources of capital, partnering and acquisition
opportunities as well as day to day operations.

Research and development expense increased 99% to $171,900 for the nine months
ended March 31, 2004 from $86,600 for the nine months ended March 31, 2003. In
the three months ended March 31, 2004, research and development expense
increased 244% to $21,750 from $6,300 for the three months ended March 31, 2003.
The increase in research and development costs are primarily as a result of
costs incurred in the planning and development of our next generation software
and researching products and intellectual property for potential partnering
opportunities. Of these expenses, approximately $165,000 were paid with shares
of our common stock. We anticipate research and development expenses for the
development of our next generation product as well as our ongoing analysis of
third party products and intellectual property to approach $225,000 in fiscal
2004.

Interest expense increased 4,276% to $1,108,000 for the nine months ended March
31, 2004 from $25,300 for the nine months ended March 31, 2003. In the three
months ended March 31, 2004 interest expense increased 6,080% to $383,600 from
$6,200 for the three months ended March 31, 2003. All increases are related to
the amount of issued debt of $1,800,000 compared to $200,000 at March 31, 2004
and 2003, respectively and the amortization of the debt discounts related to
this debt in 2004.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2004, we had cash and cash equivalents of approximately $73,000.
Net cash used in operations decreased to $666,900 for the nine months ended
March 31, 2004 compared with $737,600 for the nine months ended March 31, 2003.
The $82,700 improvement was primarily the result of the issuance of 3,834,072,
shares of common stock issued in lieu of cash for services of $5,304,200
offsetting the difference in operating loss of $4,594,700 and amortization of
debt discount of $358,300 offset by the reduction of payables and accrued
liabilities of $597,000 and the increase in inventory of $10,000.


                                       9
<PAGE>

Net cash provided by financing activities was approximately the same at $699,700
and $650,000 for the nine months ended March 31, 2004 and 2003 respectively. The
Company is still searching for additional financing to help fund its future
growth and cash flow needs. No additional funding has been received halfway
through since halfway through the quarter ended December 31, 2003. As mentioned
in the subsequent/recent events sections of this filing, a short term loan has
been put in place to help with some of the Company's short term cash needs.

From our inception in 2002 we have financed our operations primarily through
private sales of common stock and convertible debentures. We have negative
working capital totaling $1,563,000 which consists primarily of $1,676,000 of
convertible investor notes, which is net of debt discounts (for price discounts
and warrant issuances) totaling $303,900 and includes accrued interest of
$130,000.

There is a "Going Concern" reservation in our auditor's opinion for the year
ended June 30, 2003. We are currently seeking sources of capital as we believe
we may have difficulty meeting and servicing our current operating cash flow
requirements in the next one to three months. At March 31, 2004 we had cash of
$73,000; accounts payable of $53,000, and accrued liabilities of $226,000.

By June 1, 2004, $750,000 of the convertible notes become due and payable. We
have no assurances that these notes will be converted into common stock per the
terms of the debentures. We currently have no borrowings available to us under
any credit arrangement, and we will look for additional debt and equity
financings should cash provided from operations be insufficient to support our
debt obligations and our ongoing operations of the business. Adequate funds may
not be available on terms acceptable to us. If additional funds are raised
through the issuance of equity securities, dilution to existing stockholders may
result. If funding is insufficient at any time in the future, we may be unable
to develop or enhance our products or services, take advantage of business
opportunities or respond to competitive pressures, any of which could have a
material adverse effect on our financial position, results of operations and
cash flows. The Company has no material commitments for capital expenditures and
there are no anticipated material capital expenditures that are reasonably
expected to have a material impact on the Company.

Even with financing, there can be no assurance that we will achieve
profitability. Due to these factors, we believe that period-to-period
comparisons of our results of operations are not necessarily a good indication
of future performance. The results of operations in some future periods may be
below the expectations of analysts and investors.

We expect operating losses and negative operating cash flows to continue for at
least the next twelve months, because of expected increases in expenses related
to brand development; marketing and other promotional activities; increases in
personnel; the expansion of infrastructure and customer support services;
strategic relationship development; and potential acquisitions of related
complementary businesses. We believe the expenses incurred here will help us to
build the infrastructure necessary to increase revenues both through organic
growth and through acquisitions, which we believe hold the key to our future
revenue growth. We feel it will take additional products, either created in
house or acquired through acquisitions, to help us increase revenue, and
ultimately to reach profitability. However, we can make no assurances that these
activities will achieve the desired results of increased revenues, nor that any
increase in revenues will be enough to bring the company to profitability and
positive cash flow.

Pursuant to the merger agreement with Wherify Wireless, Inc., at closing the
Company is required to have $4,000,000 in cash on its most recent regularly
prepared balance sheet and that if such funds are raised from the sale of equity
securities, that such sales be done at a minimum price of $1.00 per share. The
Company will be seeking additional financing from third parties in order to meet
this obligation.

CRITICAL ACCOUNTING POLICIES

INTANGIBLE ASSETS

Our intangible assets consist of a customer list acquired in the JVWEB / IQ
Biometrix acquisition in March 2002 and the FACES software code. We recorded the
cost of the software and amortize the cost over the estimated useful life of 3
years. We review the value of our intangible assets quarterly and determine its
value. At March 31, 2004 we had a net carrying value for our intangible assets
of $97,000.

REVENUE RECOGNITION

We adopted revenue recognition policies that comply fully with the guidance in
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements." Revenue consists of shipped customer orders and completed services.
Revenue is not recognized until the product has been shipped or the service
completed and there is a certainty of payment.


                                       10
<PAGE>

We account for the licensing of software in accordance with American Institute
of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-2,
Software Revenue Recognition. The application of SOP 97-2 requires judgment,
including whether a software arrangement includes multiple elements, and if so,
whether vendor-specific objective evidence (VSOE) of fair value exists for those
elements. Changes to the elements in a software arrangement, the ability to
identify VSOE for those elements, the fair value of the respective elements, and
changes to a product's estimated life cycle could materially impact the amount
of earned and unearned revenue. Judgment is also required to assess whether
future releases of certain software represent new products or upgrades and
enhancements to existing products.

INFLATION

In our opinion, inflation has not had a material effect on our operations.

CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Chief Executive
Officer/Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based closely on the definition of "disclosure
controls and procedures" in Rule 13a-14(c). In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. The Company maintains that the
controls and procedures in place do provide reasonable assurance that all
necessary disclosures are communicated as required.

There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date the Company completed its evaluation.

RISK FACTORS

RISKS RELATED TO OUR FINANCIAL RESULTS

WE CURRENTLY LACK LIQUIDITY AND WE WILL NEED TO RAISE ADDITIONAL EQUITY OR DEBT
FINANCING TO FUND OUR OPERATIONS.

To date, we have had no meaningful revenues and there is a "Going Concern"
reservation in our auditor's opinion for the year ended June 30, 2003. We have
heretofore financed our business through the procurement of capital investments.
At March 31, 2004, we had cash, cash equivalents and short-term investments of
$73,000; our accounts payable were approximately $52,000, and we had accrued
expenses of $226,000. In order to address our immediate liquidity issues, we are
seeking additional debt or equity financing. We currently do not have any credit
arrangements. We may not be able to obtain additional debt or equity financing.
If successful in raising additional financing, we may not be able to do so on
terms that are not excessively dilative to existing stockholders or less costly
than existing sources of financing. Failure to secure additional financing in a
timely manner and on favorable terms in the future could have a material adverse
impact on our financial performance and stock price and require us to implement
certain cost reduction initiatives and curtail our operations.

In addition, any financing arrangement may have potentially adverse effects on
us or our stockholders. Debt financing (if available and undertaken) may involve
restrictions limiting our operating flexibility. Moreover, if we issue equity
securities to raise additional funds, the following results may occur:

* The percentage ownership of our existing stockholders will be reduced;

* Our stockholders may experience additional dilution in net book value per
share;

* The new equity securities may have rights, preferences or privileges senior to
those of the holders of our common stock.

We are seeking to increase our revenues by increasing sales of our existing
products through the expansion of our marketing program and our sales force. We
are also exploring the development of new products that are synergistic to our
existing business and actively seeking out acquisition and partnering prospects
that would complement our existing product offerings, augment our market
coverage, or enhance our technological capabilities. There can be no assurance
that we will be successful in increasing sales of our existing products,
developing or locating new products, or consummating any acquisitions or
partnering transactions. Even if we were able to develop or acquire new
products, there can be no assurance that sales of these new products would
result in increased revenues, in which case our business, results of operations
and financial condition would be materially and adversely affected.


                                       11
<PAGE>

OUR LIMITED OPERATING HISTORY MAKES AN EVALUATION OF US AND OUR FUTURE EXTREMELY
DIFFICULT.

In early fiscal 2004, we began selling our FACES(TM) 4.0 product, and we have
generated very limited revenues from its sale. Given our extremely limited
revenues to date and our current limited cash resources, if our revenues in any
period are lower than we project, our business, results of operations and
financial condition would be materially and adversely affected. In addition, our
ability to forecast accurately our quarterly revenue and expenses is limited due
to a number of factors, including:

* The fact that we currently derive substantially all of our revenues from sales
of our FACES (TM) software product and our expectation that we will continue to
derive substantially all of our revenues from this product for the foreseeable
future;

* The market's limited acceptance of our product to date;

* Our ability to develop and increase our customer base;

* Our need to expand our distribution capability;

* Our ability to implement and successfully execute our sales and marketing
strategy;

* Our need to introduce new products and services to respond to technological
and competitive developments and customer needs;

* Our ability to manage the growth we are seeking to realize;

* Our ability to respond to competitive developments;

* Our dependence on our current executive officers and key employees;

* Our ability to provide superior customer service and order fulfillment.

There can be no assurance that we can successfully address some or all of these
risks but our failure to do so could materially and adversely affect our
business, prospects, financial condition and results of operations.

WE HAVE A HISTORY OF LOSSES AND DO NOT KNOW WHEN WE MAY BECOME PROFITABLE OR IF
WE DO BECOME PROFITABLE WHETHER WE CAN SUSTAIN PROFITABILITY.

We have incurred net losses of $11,044,147 since inception. As of March 31,
2004, we had an accumulated stockholder deficit of $1,460,257 million and we
expect to continue to incur net losses for the foreseeable future. We also
expect to incur significant product development, sales and marketing and general
and administrative expenses. As a result, we will need to generate increased
revenues to achieve profitability and we may not be able to generate sufficient
revenues to achieve profitability. To increase our revenues, we must increase
sales of our existing products and introduce new products that we have either
developed internally or acquired through other arrangements. While we believe we
can grow our revenues from our existing product through internal actions, the
rate of growth will most likely not allow us to achieve our breakeven quarterly
revenue level in a timely manner. Therefore, we continue to evaluate business
combinations and partnering arrangements in our core business areas that would
improve our market share position, increase our revenue, improve on our net loss
position and accelerate our ability to reach profitability. While we are seeking
acquisitions that we believe would improve our financial results, a completed
acquisition may not provide the anticipated financial results, thus leading to
continuing net losses. Even if we achieve profitability, we may not be able to
sustain or increase profitability on a quarterly or annual basis. We are seeking
to increase our revenues by increasing the sales of our existing products
through the expansion of our marketing program and our sales force. We are also
exploring the development of new products that are synergistic to our existing
business and actively seeking out acquisition and partnering prospects that
would complement our existing product offerings, augment our market coverage, or
enhance our technological capabilities. There can be no assurance that we will
be successful in increasing sales of our existing products or in developing or
locating new products. Even if we were able to develop or acquire new products,
there can be no assurance that sales of these new products would result in
increased revenues, in which case our business, results of operations and
financial condition would be materially and adversely affected.

FLUCTUATIONS IN OUR BUSINESS AND OPERATING RESULTS MAY MATERIALLY AND ADVERSELY
AFFECT THE TRADING PRICE OF OUR COMMON STOCK.

We expect that our operating results will fluctuate in the future due to a
number of factors many of which are outside of our control. These factors
include the following:

* Customer concentration; most of our current and prospective customers are
local, state and federal law enforcement agencies, many of which are
experiencing their worst budget crisis in years;

* Budgetary cycles of governmental agencies;


                                       12
<PAGE>

* Overall demand for our products;

* Our ability to attract new customers at a steady rate;

* The rate at which we or our competitors introduce new products, the rate at
which these products acquire market acceptance, and the cost required to develop
these products;

* Technical defects in our products that could delay product shipments or
increase the costs of introducing new products;

* Changes in the pricing of our products or those of our competitors;

* The amount and timing of capital expenditures and other costs relating to the
expansion of our operations;

* Costs relating to our marketing programs and our business in general;

* General economic conditions.

Any of the foregoing factors may cause our operating expenses to be
disproportionately high or cause our revenue and operating results to fluctuate
causing our business, financial condition and operating results to be adversely
affected. In addition, to respond to changes in our competitive environment, we
may occasionally make certain decisions from which we may benefit in the long
run. However, in the short run, such decisions could materially and adversely
affect our quarterly results of operations and financial condition. Due to all
of the foregoing factors, in some future quarter our operating results may fall
below our expectations and those of our stockholders. In such event, the trading
price of our common stock could be materially adversely affected. Further, we
believe that period-to-period comparisons of our financial results may not be
very meaningful. Accordingly, you should not conclude that such comparisons
indicate future performance.

RISKS RELATED TO OUR BUSINESS

OUR BUSINESS WILL NOT GROW UNLESS THE MARKET FOR BIOMETRIC SOLUTIONS EXPANDS
BOTH DOMESTICALLY AND INTERNATIONALLY.

Our revenues are derived from the sale of biometric products. Biometric
solutions have not gained widespread commercial acceptance. We cannot accurately
predict the future growth rate, if any, or the ultimate size of the biometric
technology market. The expansion of the market for our products and services
depends on a number of factors including without limitation:

o the cost, performance and reliability of our products and services and the
products and services of competitors;

o customers' perception of the perceived benefit of biometric solutions;

o public perceptions of the intrusiveness of these solutions and the manner in
which firms are using the information collected;

o public perceptions regarding the confidentiality of private information;

o proposed or enacted legislation related to privacy of information;

o customers' satisfaction with our products and services; and

o marketing efforts and publicity regarding these products and services.

IF WE FAIL TO GENERATE REPEAT OR EXPANDED BUSINESS FROM OUR CURRENT AND
PROSPECTIVE CUSTOMERS, OUR BUSINESS WILL BE SERIOUSLY HARMED.

We believe that our success will depend on the continued growth of our customer
base as well as the sale of new and enhanced products to our existing customers.
Over 150,000 licenses to pre-4.0 versions of our FACES(TM) product have been
distributed to law enforcement agencies in the United States and we expect to
focus a large part of our sales and marketing efforts with respect to our new
products on these existing customers. If we are to be successful in generating
sales from our existing customers, we will need to convince them that our new
products provide them with additional benefits. In addition, our ability to
attract new customers will depend on a variety of factors, including the
reliability and cost-effectiveness of our products and our ability to
effectively market our

products. If we fail to generate repeat and expanded business from our current
and prospective customers, our operating results will be seriously harmed.

IF WE FAIL TO PROMOTE OUR BRAND NAME SUCCESSFULLY OR IF WE INCUR SIGNIFICANT
EXPENSES PROMOTING AND MAINTAINING OUR BRAND NAME, OUR BUSINESS COULD BE HARMED.


                                       13
<PAGE>

Due in part to the emerging nature of the market for our products and the
substantial resources available to some of our competitors, there may be a
limited time opportunity for us to achieve and maintain a significant market
share. Developing and maintaining awareness of our brand name is critical to
achieving widespread acceptance of our products. Furthermore, we believe that
the importance of brand recognition will increase as competition in the market
for products such as ours increases. Successfully promoting and positioning our
brand will depend largely on the effectiveness of our marketing efforts. To
attract and retain customers and to promote and maintain our brands in response
to competitive pressures, we may need to increase our marketing budget or
otherwise to increase substantially our financial commitment to creating and
maintaining brand loyalty among vendors and consumers. If we are unable for
financial reasons to increase our sales and marketing budget or if we are unable
to successfully promote our brand, our business will suffer.

OUR REVENUES ARE DEPENDENT UPON THE AVAILABILITY AND TIMELY DISTRIBUTION OF
GOVERNMENTAL FUNDING.

Many of our prospective customers are local, state and federal law enforcement
and other governmental and quasi-governmental agencies. The ability of these
prospective customers to purchase our products are heavily dependent on the
availability or continued availability of federal, state or local government
funds or grants and general tax funding, including funding by the Office of
Homeland Security. Such funding may not be approved or, if approved, it may not
be available for the purchase of our products or solutions, and even if such
funding is approved and available, such funds may be subject to termination at
any time at the sole discretion of the government body providing or receiving
such funds.

RAPID TECHNOLOGICAL CHANGE IN OUR MARKET COULD CAUSE OUR PRODUCTS TO BECOME
OBSOLETE OR REQUIRE US TO REDESIGN OUR PRODUCTS.

We expect that our market will be characterized by rapid technological change,
frequent new product introductions and enhancements, uncertain product life
cycles, changing customer demands and evolving industry standards, any of which
can render existing products obsolete. We believe that our future success will
depend in large part on our ability to develop new and effective products in a
timely manner and on a cost effective basis. As a result of the complexities
inherent in our product, major new products and product enhancements can require
long development and testing periods, which may result in significant delays in
the general availability of new releases or significant problems in the
implementation of new releases. In addition, if we or our competitors announce
or introduce new products our current or prospective customers may defer or
cancel purchases of our products, which could materially adversely affect our
business, operating results and financial condition. Our failure to develop
successfully, on a timely and cost effective basis, new products or new product
enhancements that respond to technological change, evolving industry standards
or customer requirements would have a material adverse affect on our business,
operating results and financial condition.

IF WE LOSE ANY KEY PERSONNEL, OR FAIL TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, WE MAY BE UNABLE TO CONTINUE DEVELOPING OUR BUSINESS AND PRODUCT
LINE.

The loss of the services of one or more of our key personnel could materially
adversely affect our business, operating results and financial condition. We
cannot guarantee that we will be able to retain our key personnel. Our future
success also depends on our continuing ability to attract, assimilate and retain
highly qualified sales, technical and managerial personnel. Competition for
these individuals is intense, and there can be no assurance that we can attract,
assimilate or retain necessary personnel in the future.

FAILURE TO EXPAND OUR SALES AND DISTRIBUTION CHANNELS AND MANAGE OUR SALES AND
DISTRIBUTION RELATIONSHIPS COULD SIGNIFICANTLY REDUCE OUR REVENUES.

We sell our products through a network of distributors and resellers. Our
success will depend on our ability to manage relationships with our existing
network of distributors and resellers and to expand our network of resellers and
distributors. The sale of our products by our distributors and resellers depends
on the effectiveness of their selling efforts and their ability to meet their
own responsibilities under agreements with customers in a timely manner. At
times, our distributors and resellers may also offer products of our competitors
and our agreements with them have no minimum purchase commitments. We cannot
assure you that we will be able to expand our distribution channels, manage our
distribution relationships successfully or that our distributors and resellers
will market and sell our products effectively. Our failure to manage
successfully our distribution relationships or the failure of our distributors
and resellers to sell our products could reduce our revenues and have a material
adverse effect on business, results of operations and financial conditions.

RISKS RELATED TO DEVELOPING OUR PRODUCTS

SUBSTANTIALLY ALL OF THE SOFTWARE DEVELOPMENT FOR OUR FACES(TM) 4.0 PRODUCT WAS
OUTSOURCED TO A THIRD PARTY. IF WE CONTINUE TO USE THIRD PARTY DEVELOPERS FOR
FUTURE PRODUCT RELEASES WE MAY IN THE FUTURE BE SUBJECT TO DELAYS IN PRODUCT
RELEASES, ENHANCEMENTS AND UPGRADES AS WELL AS QUALITY CONTROL ISSUES.

We outsourced the development of our FACES(TM) 4.0 software to Entreprise
Cogniscience, Inc. an independent software developer. Although, FACES(TM) 4.0
was commercially released in 2003, we have discovered and we may continue to
discover errors and defects in FACES(TM) 4.0. The fact that we do not directly
control the development of our product subjects us to the risk that we may
experience delays in issuing error corrections or enhancements to our most
recent release. Recently, Entreprise Cogniscience was acquired by a third party.
While, the agreement between us and Entreprise Cogniscience is binding upon any
successor-in-interest to Entreprise Cogniscience, we cannot guarantee that the
acquiror will devote as many resources to fulfilling the agreement as Entreprise
Cogniscience did before the acquisition or that the quality of their work will
meet our specifications. If the successor-in-interest fails to devote as many
resources to our product or if the quality of their work does not meet our
specification, it could lead to delays in releasing any error corrections or bug
fixes. In addition, if we continue to use Entreprise Cogniscience or another
independent software developer to develop future releases or products, we may
experience delays in future product releases, enhancements and upgrades, as well
as difficulties in maintaining quality control which may lead to higher than
expected error and defect rates, all of which could have an adverse effect on
our business, results of operations and financial condition.


                                       14
<PAGE>

WE DEPEND ON THIRD-PARTY TECHNOLOGY FOR THE DEVELOPMENT OF OUR SOFTWARE. IF WE
WERE TO TERMINATE OUR RELATIONSHIP WITH SUCH THIRD PARTY PROVIDER, WE COULD
EXPERIENCE DELAYS IN FUTURE PRODUCT RELEASES AND IMPROVEMENTS PRODUCTS.

Entreprise Cogniscience, the third party software developer that assisted us in
the development of FACES(TM) 4.0, used a proprietary environment based on LISP
to develop our software. If we were to bring our software development in-house
or if our relationship with Entreprise Cogniscience were otherwise to terminate,
we would need to port our source code to a new development environment, which
may cause us to experience delays in future product releases, enhancements and
upgrades, as well as higher than expected error and defect rates, all of which
could have an adverse effect on our business, results of operations and
financial condition.

OUR SOFTWARE PRODUCTS ARE COMPLEX AND MAY CONTAIN UNKNOWN DEFECTS THAT COULD
RESULT IN NUMEROUS ADVERSE CONSEQUENCES.

Complex software products such as ours often contain latent errors or defects,
particularly when first introduced, when new versions or enhancements are
released and when configured for a specific customer. We currently have
experienced errors and defects in our most recent release. However, there can be
no assurance that despite testing, defects and errors will not be found in
current versions, new versions or enhancements of our products after
commencement of commercial shipments, any of which could result in damage to our
reputation, the loss of sales, a diversion of our product development resources,
or a delay in market acceptance, and thereby materially adversely affecting our
business, operating results and financial condition. The computer hardware
environment is characterized by a wide variety of non-standard configurations
that make prerelease testing for programming or compatibility errors very
difficult and time consuming. Despite our testing, errors may still be
discovered in some new products or enhancements after the products or
enhancements are delivered to customers. Furthermore, there can be no assurance
that our products will meet all of the expectations and demands of our
customers. The failure of our products to perform to customer expectations could
give rise to warranty claims. Any of these claims, even if not meritorious,
could result in costly litigation or divert management's attention and
resources. We do not currently maintain any general liability insurance. Any
general liability insurance that we may carry could be insufficient to protect
us from all liability that may be imposed under any asserted claims. Although
through our license agreements with customers we try to include provisions
designed to limit our exposure to potential claims, such limitation of liability
provisions may not be effective as a result of existing or future laws or
unfavorable judicial decisions.

We outsource the packaging of our product, which consists of transferring our
FACES(TM) software onto compact discs, quality control testing and packaging the
CDs and manuals, to Stephen Gould Corporation in Sacramento, CA. There are a
number of software packaging companies that we could use in the event our
current vendor becomes unavailable. We have multiple sources for compact discs.
Quality control tests are selectively performed on finished products. We also
outsource our product fulfillment to OnFullfillment Inc. in Newark, CA, which
stores inventory, packages and ships orders.

We presently manage all our own information processing, vendor management,
logistics services, licensing, and related supporting functions from our
Fremont, California office.

IF THE USE OF OUR PRODUCTS IS DEEMED TO BE AN INVASION OF PERSONAL PRIVACY
RIGHTS OUR BUSINESS MAY SUFFER.

From time to time, biometric products such as ours have been the focus of
organizations and individuals seeking to curtail or eliminate the use of these
technologies on the grounds that these technologies may be used to diminish
personal privacy rights. In the event that such initiatives result in
restrictive legislation, the market for products such as ours may be adversely
affected.

IF WE GROW OUR BUSINESS AS PLANNED, WE MAY NOT BE ABLE TO MANAGE PROPERLY OUR
GROWTH, WHICH MAY IMPEDE OUR ABILITY TO ACHIEVE PROFITABILITY.

If we are successful in growing our business as we plan, our operations may
expand rapidly and significantly. Any rapid growth could put a significant
strain on our management, operational and financial resources. In order to
manage the growth of our operations, we will be required to expand existing
operations, to implement new operational, financial and inventory systems,
procedures and controls, including improvement of our financial and other
internal management systems, and to hire, train, manage and expand our employee
base. If we are unable to manage growth effectively, our business, results of
operations and financial condition will be materially adversely affected. In
addition, if we are successful in growing our business as we plan, we expect
operating expenses to increase, and as a result, we will need to generate
increased revenue to achieve and maintain profitability. In particular, as we
grow our business, we would incur additional costs and expenses related to:


                                       15
<PAGE>

* The expansion of our sales force and distribution channels;

* The expansion of our product and services offerings;

* Development of relationships with strategic business partners;

* The expansion of management and infrastructure;

* Brand development, marketing and other promotional activities.

Costs associated with these activities could delay our ability to achieve or
maintain profitability.

OUR ACQUISITION STRATEGY MAY BE UNSUCCESSFUL, WHICH MAY HARM OUR ABILITY TO GROW
REVENUES.

We believe that our future success depends on our ability to introduce and
market new products and services that we have either developed internally or
acquired through strategic combinations or partnering relationships. We intend
to actively seek out acquisition and partnering prospects that would complement
our existing product offerings, augment our market coverage, or enhance our
technological capabilities. This strategy is subject to inherent risks
associated with the potential integration of additional operations, the extent
of management time and attention required, and related costs and expenses
associated with the execution of this strategy.

WE WILL FACE TECHNICAL, OPERATIONAL AND STRATEGIC CHALLENGES THAT MAY PREVENT US
FROM SUCCESSFULLY INTEGRATING BUSINESSES WE MAY ACQUIRE IN THE FUTURE.

Execution of our acquisition and partnering strategy could result in a number of
financial consequences, including without limitation:

* Use of cash resources that would reduce our financial reserves;

* Issuance of stock that would dilute our current stockholders' percentage
ownership;

* Incurrence of debt;

* Assumption of liabilities;

* Increased operational and administrative complexity of our business;

* Higher fixed expenses, which require a higher level of revenues to maintain
gross margins; and

* Incurrence of expenses related to in-process research and development and the
possible impairment of goodwill and other intangible assets, which could result
in large one-time write-offs.

Furthermore, acquisitions involve numerous operational risks, including:

* Problems related to the integration and management of acquired technology,
products, operations, information systems and personnel of the acquired company;

* Problems completing product development programs of the acquired company and
consolidating research and development efforts;

* Unanticipated costs or liabilities;

* Diversion of management's attention from our core business;

* Diversion of resources from our existing business, products or technologies;

* Adverse effects on existing business relationships with suppliers and
customers;

* Risks associated with entering markets in which we have no or limited prior
experience; and

* Potential loss of key employees, particularly those of the acquired
organizations.

The integration of businesses that we may acquire could be a complex, time
consuming and expensive process. We must operate as a combined organization
utilizing common information and communication systems, operating procedures,
financial controls and human resources practices to be successful. We cannot
guarantee that any future acquisitions will result in sufficient revenues or
earnings to recover our investment in, or expenses related to, these
acquisitions or that any synergies will develop. If we are not successful in
integrating acquired businesses or if expected earnings or synergies do not
materialize, we could be forced to attempt to resell or cease operations of
acquired businesses. In either event, we would likely incur significant expenses
as well as non-cash charges to write-off acquired assets, which could seriously
harm our financial condition and operating results.


                                       16
<PAGE>

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY.

Our future success depends upon our proprietary technology. We are protecting
our proprietary information through the use of patent, copyright, trademark,
trade secret laws, confidentiality procedures and contractual provisions.
Notwithstanding our efforts to protect our proprietary technology, policing
unauthorized use or copying of our proprietary information is difficult,
unauthorized use or copying occurs from time to time, and litigation to enforce
intellectual property rights could result in significant costs and diversion of
resources. Any patents we obtain in the future may be circumvented, challenged,
invalidated or designed around by other companies. Despite our efforts, we may
be unable to prevent third parties from infringing upon or misappropriating our
intellectual property. Moreover, the laws of some foreign jurisdictions do not
afford the same degree of protection to our proprietary rights as do the laws of
the United States, and effective trademark, copyright, and trade secret
protection may not be available in every country in which our products are
distributed. Furthermore, our competitors may independently develop similar
technology that substantially limits the value of our intellectual property. Our
inability to protect adequately our intellectual property for these or other
reasons could materially and adversely affect our business, financial condition
and operating results.

In addition, third parties may at some point claim certain aspects of our
business infringe their intellectual property rights. While we are not currently
subject to nor are aware of any such claim, any future claim (with or without
merit) could result in one or more of the following:

* Significant litigation costs;

* Diversion of resources, including the attention of management;

* Our agreement to pay certain royalty and/or licensing fees; and

* Cessation of our rights to use, market, or distribute such technology.

Any of these developments could materially and adversely affect our business,
results of operations and financial condition. In the future, we may also need
to file lawsuits to enforce our intellectual property rights, to protect our
trade secrets, or to determine the validity and scope of the proprietary rights
of others. Whether successful or unsuccessful, such litigation could result in
substantial costs and diversion of resources. Such costs and diversion could
materially and adversely affect our business, results of operations and
financial condition.

OUR FINANCIAL PERFORMANCE MAY BE ADVERSELY AFFECTED BY COMPETITION.

The market for our products is characterized by significant and increasing
competition. Most of our current and potential competitors have longer operating
histories and significantly greater financial, technical and marketing resources
than we do. We expect competition to intensify in the future as new companies
enter the market on a regular basis. There can be no assurance that existing or
future competitors will not develop or offer products that provide significant
performance, price or other advantages over those we offer. Such a development
could result in price reductions or displacement of our products, which could
materially adversely affect our business, results of operations and financial
condition.

RISKS RELATED TO OUR CORPORATE GOVERNANCE

OUR AUTHORIZED PREFERRED STOCK EXPOSES STOCKHOLDERS TO CERTAIN RISKS.

Our Certificate of Incorporation authorizes the issuance of up to 10,000,000
shares of preferred stock, par value $.01 per share. No shares of preferred
stock have been issued to date. The authorized preferred stock constitutes what
is commonly referred to as "blank check" preferred stock. This type of preferred
stock allows the Board of Directors to divide the preferred stock into series,
to designate each series, to fix and determine separately for each series any
one or more relative rights and preferences and to issue shares of any series
without further stockholder approval. Preferred stock authorized in series
allows our Board of Directors to hinder or discourage an attempt to gain control
of the Company by a merger, tender offer at a control premium price, proxy
contest or otherwise. Consequently, the preferred stock could entrench our
management. In addition, the market price of our common stock could be
materially and adversely affected by the existence of the preferred stock.

OUR COMMON STOCK HAS A LIMITED AND VOLATILE TRADING HISTORY.

Our common stock trades in the United States on the Over-the-Counter Electronic
Bulletin Board (OTCBB). The number of shares traded daily has been extremely
limited and the prices at which our common stock has traded have fluctuated
fairly widely. See "PRICE RANGE OF COMMON STOCK." There can be no assurance as
to the prices at which our common stock will trade in the future, although they
may continue to fluctuate significantly. Prices for our common stock will be
determined in the marketplace and may be influenced by many factors, including
the following:


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<PAGE>

* The depth and liquidity of the markets for our common stock;

* Investor perception of us and the industry in which we operate;

* General economic and market conditions; and

* The effect that of any of the events highlighted in these Risk Factors may
have on our business should they occur.

WE HAVE THE ABILITY AND THE OBLIGATION TO ISSUE ADDITIONAL SHARES OF COMMON
STOCK IN THE FUTURE, AND SUCH FUTURE ISSUANCE MAY MATERIALLY ADVERSELY AFFECT
STOCKHOLDERS.

We have various abilities and obligations to issue additional shares of common
stock in the future. These abilities and obligations include the following:

* Approximately 523,073 registered shares of our common stock are available for
issuance to outside consultants to compensate them for services provided;

* Options to purchase approximately 3,020,000 shares of our common stock were
outstanding as of April 30, 2004;

* Warrants to purchase approximately 2,531,200 shares of common stock were
outstanding as of April 30, 2004;

* Debentures, convertible into 4,873,750 shares of common stock had been issued
as of April 30, 2004

The options and warrants described above permit the holders to purchase shares
of common stock at specified prices. These purchase prices may be less than the
then current market price of our common stock. Any shares of common stock issued
pursuant to these options or warrants (or the convertible debentures described
above) would further dilute the percentage ownership of existing stockholders.
The terms on which we could obtain additional capital during the life of these
options, warrants or convertible debentures may be adversely affected because of
such potential dilution. Finally, we may issue additional shares in the future
other than as listed above. There are no preemptive rights in connection with
our common stock. Thus, the percentage ownership of existing stockholders may be
diluted if we issue additional shares in the future. For issuances of shares and
grants of options to consultants, our Board of Directors will determine the
timing and size of the issuances and grants, and the consideration or services
required thereof. Our Board of Directors intends to use its reasonable business
judgment to fulfill its fiduciary obligations to our then existing stockholders
in connection with any such issuance or grant. Nonetheless, future issuances of
additional shares could cause immediate and substantial dilution to the net
tangible book value of shares of common stock issued and outstanding immediately
before such transaction. Any future decrease in the net tangible book value of
such issued and outstanding shares could materially and adversely affect the
market value of the shares.

SALES OF OUR COMMON STOCK, INCLUDING THOSE SHARES COVERED BY THIS PROSPECTUS
(WHICH UPON EFFECTIVENESS OF THIS REGISTRATION STATEMENT MAY BE SOLD AT ANY
PRICE AND AT ANY TIME), COULD REDUCE THE PRICE OF OUR COMMON STOCK.

After the registration statement has become effective, the holders of the shares
covered by this prospectus may sell the shares registered pursuant to this
registration statement at any price and at any time determined by them without
limitation. The price of our common stock may be adversely affected upon the
sale of the shares registered hereby.

THE TRADING PRICE OF OUR COMMON STOCK ENTAILS ADDITIONAL REGULATORY
REQUIREMENTS, WHICH MAY NEGATIVELY AFFECT SUCH TRADING PRICE.

The trading price of our common stock is currently below $5.00 per share. As a
result of this price level, trading in our common stock is subject to the
requirements of certain rules promulgated under the Securities Exchange Act of
1934. These rules require additional disclosure by broker dealers in connection
with any trades generally involving any non-NASDAQ equity security that has a
market price of less than $5.00 per share, subject to certain exceptions. Such
rules require the delivery, before any "penny stock" transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith, and impose various sales practice requirements on broker dealers who
sell penny stocks to persons other than established customers and accredited
investors (generally institutions). For these types of transactions, the
broker-dealer must determine the suitability of the penny stock for the
purchaser and receive the purchaser's written consent to the transaction before
sale. The additional burdens imposed upon broker dealers by such requirements
may discourage broker-dealers from effecting transactions in our common stock
affected. As a consequence, the market liquidity of our common stock could be
severely limited by these regulatory requirements.

STOCKHOLDERS HAVE NO GUARANTEE OF DIVIDENDS.

The holders of our common stock are entitled to receive dividends when, as and
if declared by the Board of Directors out of funds legally available therefore.
To date, we have not declared nor paid any cash dividends. The Board of
Directors does not intend to declare any dividends in the foreseeable future,
but instead intends to retain all earnings, if any, for use in our business
operations.

ITEM 3. CONTROLS AND PROCEDURES

In accordance with the Securities and Exchange Act of 1934, as amended, we
carried out an evaluation, under the supervision and with the participation of
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of our disclosure controls and procedures as of the end of
the period covered by this report. Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of March 31, 2004, to provide reasonable assurance
that information required to be disclosed in our reports filed or submitted
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms. There has been no change in our internal controls over financial
reporting that occurred during the three and nine months ended March 31, 2004,
that has materially affected, or is reasonably likely to materially affect, our
internal controls over financial reporting.


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<PAGE>

                                     PART II

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

RECENT SALES OF UNREGISTERED SECURITIES

On January 1, 2004, the Company issued an option to purchase 60,000 shares of
its common stock to consultants for business consulting services. The
consultants are accredited investors and the issuance of the options and the
common stock underlying the options are claimed to be exempt pursuant to
Sections 4(2) and 4(6) of the Securities Act of 1933.

On January 26, 2004, the Company issued 25,000 shares of its common stock to a
former member of the board of directors as compensation for duties performed in
that capacity and 48,841 shares to Seth Horn its former Chief Financial Officer
as compensation for duties performed in that function. Both individuals are
accredited investors and the issuance of the common stock is claimed to be
exempt pursuant to Sections 4(2) and 4(6) of the Securities Act of 1933.

On February 5, 2004, the Company issued 75,000 shares of its common stock to a
consultant for investor relations services. The consultant is an accredited
investor and the issuance of the common stock is claimed to be exempt pursuant
to Sections 4(2) and 4(6) of the Securities Act of 1933.

On March 1, 2004, the Company issued an option to purchase an aggregate of
250,000 shares of common stock to its legal counsel for legal services performed
for the Company. The individuals are accredited investors and the issuance of
the options and the common stock underlying the options are claimed to be exempt
pursuant to Sections 4(2) and 4(6) of the Securities Act of 1933.

On March 2, 2004, the Company issued 450,000 shares of its common stock to a
consultant for investor relations services performed for the Company. The
consultant is an accredited investor and the issuance of the common stock is
claimed to be exempt pursuant to Sections 4(2) and 4(6) of the Securities Act of
1933.

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<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits:

Exhibit No.   Description
-----------   -----------

10.36         Consulting Agreement between the Company and Liviakis Financial
              Communications Inc.

31.1          Certification of Chief Executive Officer pursuant to Section 302
              of the Sarbanes-Oxley Act of 2002.

31.2          Certification of Chief Financial Officer pursuant to Section 302
              of the Sarbanes-Oxley Act of 2002.

32.1          Certification of Chief Executive Officer pursuant to Section 906
              of the Sarbanes-Oxley Act of 2002.

32.2          Certification of Chief Financial Officer pursuant to Section 906
              of the Sarbanes-Oxley Act of 2002.

b. Reports on Form 8-K: None.


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<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                           IQ BIOMETRIX, INC.
                                           (Registrant)


Date August 30, 2004                        /s/ William Scigliano
                                           -------------------------------------
                                           President & CEO


Date August 30, 2004                        /s/ Michael Walsh
                                           -------------------------------------
                                           Chief Financial Officer


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